How nice would it be to get a guaranteed minimum income each month? I’m not talking about a retirement pension or annuity either. You’ll get this money as long as you’re an adult of legal age. It doesn’t matter what job you do. You could be a librarian, janitor, or fast food worker. Whatever career you have, you’re ensured of receiving a set minimum income. Does that sound appealing?
If you are a resident of Switzerland, then you’re in luck. Apparently there is a major push by a significant enough portion of the population to trigger a referendum. I’m not knowledgeable on the Swiss governmental structure, but this referendum will be put up for a vote and, if it passes as currently proposed, then each Swiss citizen will get a minimum of $2,800 each and every month – no matter what! In fact, you may not even have to be employed to receive this money (that level of detail on the referendum does not seem to be available).
The impetus for this proposal stems from trying to curb growing pay inequality. Once again, I’m not acquainted with the political landscape in Switzerland, but there appears to be a backlash against top earners similar to the sentiment that has been seen here in the US recently (rhetoric against the “1%”, increased taxes on higher earners, etc.)
Wait, there’s even more! Switzerland also has another referendum called the “1:12 initiative” which “would limit executive pay to the same amount paid to a company’s lowest paid staff member.” I’m taking that to mean if an administrative assistant made $35,000 per year, then that’s all the CEO could earn too. That’s simply astounding.
Pay Equality is a Flawed Concept
Ok, before I share my thoughts on Switzerland’s aggressive income equality movement, I need to make a disclaimer: I am not taking a political stance. While you may ascertain my words as aligning to a certain political party, you would only be making your own assumption on the matter. I am not endorsing any political party. Rather, my evaluations and opinions here are made on economic principles.
Alright, with that out of the way, what is Switzerland thinking?!
Look, I understand the resentment toward people who make beaucoup bucks. Corporate executives, professional sports athletes, politicians, etc. seem to be vastly overpaid and, in most cases, probably are. But mandating CEO pay to match the lowest paid company employee and guaranteeing a perpetual minimum income for life goes way too far. Why? Because it totally destroys any incentive to work hard and improve your lot in life.
One can debate the merits of social welfare and the resultant benefits or detriments it has on society and the economy. For example, I happen to think the ideology behind unemployment benefits is quite sound. While in a perfect world everyone would be responsible and have enough emergency savings to cope with unexpected job loss, reality dictates that’s not always the case. So, having a temporary safety net in place to help manage such a crisis is beneficial (notice the emphasis on “temporary”).
What Switzerland is doing defies sanity though. Face it, lots of people are more brilliant and/or more talented than you are. If they’ve worked hard and smart, they should get paid more! Right? Conversely, there’s a multitude of folks who weren’t blessed with your abilities or cognitive prowess. Should those guys automatically get as much as you? Should they even be guaranteed a minimum income if they’ve done nothing in their life to really earn it?
My belief is that what Switzerland is doing is dangerous and not sustainable in the long term. Now, I’m not predicting imminent doom and gloom for the country. Disincentivizing those at the top and middle while incentivizing those at the bottom (for doing nothing) doesn’t add up though. In a roundabout way, it seems like a reverse or upside down pyramid scheme. Continuing down such an income re-distribution path will eventually mean people won’t ambitiously drive new innovation. Either that, or those people will relocate elsewhere to do it. In the end, the “pyramid” will come crashing down.
Income inequality exists because it rightly should. It’s essentially the supply and demand of the labor market. I’m also not against helping those out who are in need or down on their luck. I just can’t agree with permanently giving free support to those who do little to nothing while putting the hammer down on those who strive to achieve great endeavors.
Then again, maybe I’m an idealistic fool. I’ve been experiencing bouts of job burnout recently. I’ve been laid off before and could very well be again seeing as how corporate America offers anything but job stability these days. Even vacations aren’t worth it anymore. Perhaps I should just give up and move to Switzerland. The natural landscape is brilliantly beautiful and the culture is rich and interesting. I could land a simple, low stress job (Ricola hornblower perhaps?) and be guaranteed my $33,600/year. Shoot, in doing so I may be making as much as the company’s CEO!!
Should society enact laws to ensure income equality? Or should income be based a “free market” approach where you get paid what you are “worth”? Do we owe it to society to make sure everyone is provided for at a basic, minimum level? Does that abolish incentive to work hard?
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